WHY You Should Want to Solve the Pyramid Problem: The Business Case

I’ve labeled the fact that women aren’t proportionally represented in the upper levels of business as the “pyramid problem.” Why should business leaders see this as a problem? Why should they care? What is in it for business to fix it?

Most people don’t change, or even go along with change, just because it is “the right thing to do.” They accept change only if there is an important reason to change. There are compelling bottom line reasons to achieve gender diversity in leadership. Leaders should see this not as problem for women but as a problem—and an opportunity—for business.

This piece will help you build your business case (or fill in gaps in the one you have). Only a solid business case will help you enroll others in wanting to address the pyramid problem. I separate the business case into two parts: the business benefits of an inclusive culture generally and the business benefits of gender diversity in particular. The reasons you should care about this issue include both significant costs that can be avoided and significant gains that can be captured.

THE VALUE OF AN INCLUSIVE CULTURE

Engagement, Inclusion and Results: Engagement has been convincingly linked with productivity, profitability, employee commitment and retention. Given today’s diverse workforce, to have broad engagement, there must be an inclusive workplace. According to Cumulative Gallup Workplace Studies cited in “Business Case for Diversity with Inclusion,” organizations with inclusive cultures do better than those that aren’t inclusive–higher customer satisfaction, productivity and profitability.

Lower Turnover: Turnover is costly. Estimates of direct costs range from 50 to over 200% of departing employees’ base salary. According to the Gallup Study just cited, companies with inclusive cultures have 22% lower turnover. As the economy recovers, turnover will again become a concern to business leaders; studies show that a large percentage of American workers say they will look for greener pastures as the economy improves.

Easier Recruitment: An organization with a reputation for being a good place to work for a diverse group (for example, women) has an easier time recruiting talent from that group. That saves time and money.

Better Decisions: Many people observe that decisions are better when made by a group with diverse backgrounds and perspectives. A recent study from the Kellogg School of Management says that the reason is that the tension or discomfort within heterogeneous groups leads to more careful processing of information.

Diverse Markets: Businesses with diverse workforces have an easier time tapping the multicultural economy. The buying power and influence of “minority” groups are large and growing according to buying power studies like that from the business school at the University of Georgia.

GENDER DIVERSITY IN LEADERSHIP

These are the benefits of inclusiveness generally. The case for a gender-inclusive workplace includes all of this and more:

Gender Diversity and Returns: Catalyst, a research and consulting firm that focuses on women in business, and McKinsey have both shown correlations between gender diversity in leadership and the bottom line. Catalyst found significantly higher returns in Fortune 500 companies with more women at the C-level and on their boards of directors. McKinsey found that companies with gender diversity in leadership had higher profits and stock price. Neither Catalyst nor McKinsey say that having women in leadership causes better results, but their studies indicate that having both gender diversity in leadership is good for the bottom line.

Women in the Hiring Pool: According to The Shriver Report, women are now half of the workforce. According to U.S. Department of Education data, the pool of educated workers has and will continue to have more women than men because women earn more undergraduate and graduate degrees. Therefore, to have the most skilled and talented workforce, a business must attract and retain women as well as men.

The Women’s Market: Again, a diverse culture that mirrors its markets tends to do better than a homogeneous competitor. The women’s market is key to many businesses. Women influence more than 85% of retail decisions. Women are decision-makers in more and more business-to-business relationships. Women-owned businesses are a growing sector of the U.S. economy.

Other Payoffs of Increasing Engagement among Women: Women represent the largest group in many businesses behind the group most highly represented at the upper levels of business–white, male, heterosexual, Christian. To have the greatest impact in increasing employee engagement and retention, leaders should focus on the largest group. And there is more bang for the buck: Women’s needs and values are shared by other growing sectors of the workforce. Members of Generation X and Millennials share women’s need for flexibility, desire for closer workplace relationships and preference for less hierarchical structures. Steps to make a culture work better for women will also make it work better for these growing workforce sectors.

Creating an inclusive culture is great for those who would otherwise feel less included. Supporting the advancement of women in business is great for women. But these aren’t the ultimate goals; and they won’t inspire action or change. Inclusive cultures and organizations with gender-diversity achieve better business results, including customer satisfaction, retention, productivity and profitability. The business case shows what’s in it for business to fix the pyramid problem.

2 Comments

Michael
on February 1, 2012 at 11:50 am

Once again, you’ve nailed it! Sometimes the argument evolves around nothing much more than ‘you really oughta wanna’ (pardon my stealing your book title, Mr. Mager). Years of work in the field of EEO and Affirmative Action with top management have led me to conclude, as stated by Ms. Turner that it’s the ‘right thing to do’, or even Federal mandates are not sufficient to motivate the change we seek. Reluctant compliance is often the result. The ‘business case’ provides the proper launching pad to insure the proper motivation and assure a pathway to success.